Migrants to the rescue of Victoria's economy as housing slump digs in

Victoria’s population boom, with nearly 85,000 overseas migrants settling here in the 12 months to September 2018, is keeping the state’s economy out of trouble as the property market continues to slow.

More than a third of Australia’s 240,000 overseas migrants last year made their way to Victoria, with most of the new arrivals settling in Melbourne and keeping the state's economic engines running hot.

But there are worrying signs that the housing slump is eating away at consumer confidence, according to the Department of Treasury and Finance.

Treasury boss David Martine is frank in his assessment that “Victoria’s economic growth is being partly driven by strong population growth”, with 14,000 other newcomers, in net terms, arriving in Victoria during the same period from the other states and territories.

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Mr Martine’s generally upbeat assessment has been backed by the Commonwealth Bank, whose subsidiary CommSec puts Victoria firmly on top as Australia’s fastest-growing economy, in the latest State of the States report.

The migration figures follow Prime Minister Scott Morrison's promise on Sunday to freeze the level of Australia’s intake at its present levels if he is re-elected next month, a move that is unlikely to affect Victoria’s population boom.

Mr Martine, in his regular economic update, noted that Victoria’s population growth was continuing to soar way above historic levels.

“Net overseas migration made the largest contribution to Victoria’s population growth, adding 84,800 persons over the year,” the Treasury and Finance secretary wrote.

“Victoria’s share of national net overseas migration was 35.3 per cent, significantly higher than Victoria’s population share and well above the historical average.

“Net interstate migration remains strong and added 14,000 persons over the year, although this was 2400 persons lower compared to the previous year.”

Melbourne just keeps getting bigger.Credit:Ken Irwin

But the housing market continues to weaken, Mr Martine wrote, something reflected in declining property prices and weaker building approvals.

Housing credit growth is low, with the value of loans to owner-occupiers falling by 0.6 per cent in January and 18.0 per cent lower over the year to January. Investor loans have slumped by a dramatic 29.0 per cent in the same period.

Housing approvals are also dropping away fast, with dwelling unit approvals falling by 35.9 per cent in the year to January.

Treasury says that employment is growing strongly in the state, with more jobs being created than people coming in to fill them.

More than 114,000 full-time jobs and 22,700 part-time roles were created in the 12 months to February but across Victoria’s regions the employment picture is patchy.

The job market in Geelong grew by 5100 and Warrnambool and the South West surged ahead with 4100 roles created, but Hume in the north of the state and the North West are struggling, shedding 4100 and 3700 jobs respectively

Victoria’s regional unemployment rate rose by 0.1 per cent to 4.6 per cent in the three months to February and there was a slight rise in unemployment rate across the state, by 0.2 percentage points to 4.8 per cent, blamed on an increase in the number of people looking for work.

The CommSec report found Victoria sharing, with NSW, the title of the nation’s best performing economy with the two states each benefiting from solid population growth and strong job markets, driving retail spending and business investment.